Government admits Macau will see up to 4.6% drop in GGR due to smoking ban

The government of Macau is finally admitting that the city-state’s economy will take a huge hit when the casino smoking ban takes effect.

Public broadcaster Radio Macau reported on Thursday that the health department wrote a letter to a legislator, saying it is expecting a 2.7 percent to a 4.6 percent decline in Macau’s gross gaming revenue in the event of a total smoking ban.

The legislator was reportedly asking for the health bureau’s assessment of a smoking ban in the city state. According to the health department, the assessment was made in conjunction with gaming regulator Gaming Inspection and Coordination Bureau.

But Union Gaming Securities Asia Limited believes that the decline will breach the 5-percent mark should the government decides on a full smoking ban.

“At a 5% impact, this would result in an MOP18 billion monthly GGR story becoming an MOP17.1 billion story, which in turn puts further pressure on not only government finances, but also local employment as this should result in further layoffs,” analyst Grant Govertsen said in a note.

Available data suggests that 45 percent of mainland Chinese men are smokers, while only 2 percent of women smoke. An average male smokes 16.6 cigarettes per day versus 12.8 for women. By “reverse engineering” the data, Union Gaming’s assessment came up with the 5 percent loss of GGR conclusion.

“Based on our observations of smokers in Macau, the average time to smoke a cigarette is typically less than three minutes. However, given that the smoking ban would necessitate persons leaving a casino and going to a sidewalk, the time per cigarette is likely to more than double to something like eight minutes (if not more),” Govertsen explained.

Macau’s government introduced a partial smoking ban in October 2014, restricting smoking to VIP gaming rooms and airport-style lounges on the main gaming floor. But these exemptions will be eliminated under a new plan that will have all casinos in the city-state go completely smoke-free.

Despite the protest and cries for leniency, Macau officials said they are this-close to finalizing the new law. But Union Gaming believes it will take some time—possibly a year—before the full smoking ban goes into effect.

“We actually don’t expect to hear a lot about the smoking ban over the coming months, which we would categorize as ‘no news is good news’ for the time being,” Govertsen said. “Macau’s legislative body has appeared to punt the smoking ban bill until next year due to time constraints.”


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